Time Warner Cable Says CBS is Seeking a 600% Premium

CBS Corp. President-CEO Leslie Moonves sent staffers a memo Tuesday about the company's dispute with Time Warner Cable, saying there is a very real threat CBS stations, and possibly Showtime, will be dropped in New York, Los Angeles and Dallas come Thursday morning.

In the memo, obtained by Ad Age, Mr. Moonves said the network is only looking for fair compensation. "CBS programs are among the most popular in the industry, and yet there are many cable networks -- with considerably less viewership -- that receive more money for their programming from Time Warner Cable than we do," he said.

CBS is not among the top 10 recipients of programming fees paid by Time Warner Cable, according to the memo.

"That means networks that are watched by audiences much smaller than that of our lowest-rated shows are receiving much more compensation than the network that provides viewers with The NFL on CBS, 'The Big Bang Theory' 'NCIS' and '60 Minutes,'" Mr. Moonves wrote.

CBS has never gone dark during its negotiations with other providers, Mr. Moonves said, while Time Warner Cable has taken nearly 50 channels off the air in its disputes with networks.

"We're not the only ones -- everyone is having these problems," a Time Warner Cable spokeswoman said in an emailed response. "The truth is literally every other distributor, whether cable, satellite, or telco, has acknowledged the problems created by programmers' rising costs and there have been well-publicized disputes this year and last involving cable/satellite/telco distributors and both national cable networks and local broadcast stations."

"They claim publicly that they've offered us the same rates, but privately, they've refused to offer us assurances that the rate they are seeking for CBS is the same rate they are seeking from others," she added.

At the heart of the argument, Time Warner Cable claims CBS wants to charge fees 600% higher than it pays for the same programming in smaller markets.

In the memo, Mr. Moonves says Time Warner Cable has the money to pay higher fees.

"Cable is a very, very profitable business, and Time Warner Cable can certainly afford to pay CBS a fair rate for our programming without passing any added cost on to its customers," he wrote. "According to its own billing statements, it is already charging its subscribers more than $20 a month for broadcast programming. CBS only realizes a tiny fraction of that, as do other broadcasters, and our costs for programming, news operations and sports contracts are growing all the time. In order to invest in this premium content, we need to be paid fairly for it. Yet we receive far less than channels that have nowhere near our popularity."

Mr. Moonves pointed to comments made by Time Warner Cable CEO Glenn Britt at a recent investor conference, where he said that the company would take a hard look at contracts coming up for renewal and would not keep paying for giant packages of services that don't carry their own weight.

The Time Warner spokeswoman said its decisions are based on a variety of factors, not only popularity. "We are willing to pay for CBS, and we have offered them significant fees," she said in her email. "But their current demands don't represent a good value for our customers. Nevertheless, we'll continue to negotiate, and hope to reach an agreement before the expiration."

Mr. Moonves said CBS has offered Time Warner Cable a short-term extension as they continue to negotiate, but that Time Warner has refused and could pull the network's signal as soon as Thursday morning.

The Time Warner Cable spokeswoman said the company is "happy to consider an extension offer, but right now we want to continue to negotiate to try to reach an agreement before the expiration."

The combatants are firing up the usual tactics in the kinds of carriage battles that have become common in recent years. CBS last week started running a TV spot, radio commercials and print ads in the affected markets, which include Los Angeles, New York and Dallas. It also introduced the site, KeepCBS.com, to advise viewers how they can find alternative options for viewing CBS programming on Time Warner Cable's competitors.

Time Warner Cable has said it will advise viewers to use Aereo, the streaming-TV service that broadcasters are trying to sue out of existence, to get CBS if it goes dark in the dispute.

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Jeanine Poggi

Jeanine Poggi covers the TV industry and how broadcast and cable networks and distributors are adopting to the changes in the world of TV advertising. She joined Ad Age in 2012, following six years covering the retail and media industries and other financial sectors for Women's Wear Daily, Forbes and TheStreet.